Half Yearly Report

RNS Number : 9550H

JPMorgan Indian Invest Trust PLC

23 May 2014

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE

SIX MONTHS ENDED 31ST MARCH 2014

Chairman's Statement

Performance

The first six months of the Company's financial year was a positive period for the Indian market. The Company's benchmark, the MSCI India Index (in sterling terms), returned +15.9%. The Company produced a total return on net assets of +18.7%, well ahead of the benchmark index. The return to shareholders was +20.9%, reflecting a narrowing of the discount from 14.8% to 13.3%. The background against which the Company performed is discussed in more detail in the Investment Managers' Report.

Gearing

The Company has a one year floating rate US$25 million loan facility with RBS to provide the investment managers with the flexibility to gear the portfolio should circumstances appear favourable. During the period the Investment Managers employed gearing and as at 31st March 2014, the Company's level of gearing was 3.3%. Subsequent to the half year end, the loan facility was increased to $40 million.

Continuation of the Company

I am very pleased to report that, at the Annual General Meeting held on 30th January 2014, shareholders voted in favour of the Company's continuation as an investment trust for a further five year period. As I explained in my Chairman's Statement, the management fee was reduced from 1.2% to 1.0% of total assets with effect from 1st October 2013 and the notice period was reduced to six months (for performance reasons, 12 months for all other reasons). The Board has also committed to undertake a tender offer, at net asset value less costs, of up to 25% of the issued share capital if the Company under-performs its benchmark index over the three years to 30th September 2016.

Discount Management

The Board has guidelines in place with regard to the management of the discount of share price to net asset value at which the Company's shares trade. The Company currently holds 19,909,788 Ordinary shares in Treasury and, under current guidelines, these may only be reissued at a premium to the prevailing net asset value at the time of reissue.

Share Capital

The subscription shares issued to shareholders in November 2008 (on the basis of one Subscription share for every five Ordinary shares previously held) expired on 2nd January 2014. All of the remaining subscription shares in issue were converted to ordinary shares, either by the subscription shareholders or by the trustee appointed to act on behalf of the remaining subscription shareholders as at the date of expiry.

The Alternative Investment Fund Managers Directive (the 'AIFMD')

The deadline for full compliance with the AIFMD is 22nd July 2014. The Company will appoint JPMorgan Funds Limited as its AIFM and enter into a new management agreement shortly. It will also appoint Bank of New York Mellon as its depositary with effect from the same date.

Outlook

After a difficult year to 30th September 2013, it is pleasing to report on a strong six months for the Indian market and in particular the Company's outperformance. In the short term, the market is likely to be volatile as a result of the recent election, but our investment managers remain positive over the long term given attractive equity valuations and expectations of continuing growth.

Hugh Bolland

Chairman                      

23rd May 2014

Investment Managers' Report

Market Review

After the exceptional volatility in the third quarter of 2013, a delay in the reduction of the US Federal Reserve's quantitative easing policy (the so-called 'tapering') and rising expectations about the Indian national elections led to a sharp rebound in equities in the first half of our financial year. The MSCI India index rose 15.9% (in sterling terms), led by strong inflows of over $10 billion from foreign portfolio investors.

The Indian Rupee, which had fallen precipitously in the third quarter of 2013, was well supported in the six month period by an inflow of some $34 billion from the special deposit scheme for non resident Indians. Expectations had been for an inflow of perhaps half this amount.

Activity levels in the economy continued to be sluggish, with GDP growth for the December quarter at 4.7%, which was the seventh straight quarter of sub 5% growth. Industrial production was nearly flat in the first two months of 2014. On the positive side, inflation decelerated meaningfully in the first quarter of 2014, as a sharp correction in food prices led to CPI inflation dropping by approximately 300 bps to 8.3% in March. As a result, the central bank left policy rates unchanged in the latest policy meeting, after increasing rates by a cumulative 75 bps over the past six months. That said, the prediction of a risk to the upcoming monsoon season from the El Nino weather phenomenon has raised concerns due to the potential adverse impact on agricultural output.

Earnings were mixed during the review period; while the Sensex constituents beat expectations in the December quarter, reporting year-on-year sales and profit growth of 14% and 20% respectively, the March quarter was much more subdued with several stocks disappointing against expectations. However, share prices seem to suggest that markets are looking past the near term challenges. This is also evident in the consensus forecasts, which have been upgraded (albeit modestly) over the past few months.

Performance Review

The Company outperformed the benchmark in the first half of the financial year, as the portfolio's overweight positions in financials and consumer discretionary stocks proved beneficial.

Outlook

The results from the national elections were better than even the most optimistic expectations. The B.J.P led by Mr. Narendra Modi won a clear majority, the first in 30 years. Effectively, for the first time since foreign investors began investing in Indian equities, there will be a government that is not dependent on coalition partners for survival. This gives Mr. Modi the independence to pursue his stated agenda of kick-starting the economy.

Rukhshad Shroff

Raj Nair

Investment Managers                                                                                                                                    

23rd May 2014

Interim Management Report

The Company is required to make the following disclosures in its Half Year Report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; going concern; financial; and political and economic. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th September 2013.

Any change in taxation legislation or the taxation regime applicable to the Mauritian subsidiary company could affect the value of the investments held by the Group, the Company's ability to provide returns to Shareholders or alter the post-tax returns to Shareholders. In particular, it is intended that the Mauritian subsidiary will continue to benefit from the India/Mauritius Double Tax Treaty. Future changes to Mauritian or Indian law or to the India/Mauritius Double Tax Treaty, or the interpretations given to them by the regulatory authorities, could impose additional costs or obligations on the activities of the Mauritian subsidiary, which in turn may have adverse effects on the performance of the Company. The terms of the India/Mauritius Double Tax Treaty were challenged in India but were upheld by the Supreme Court of India in October 2003. However, more recently, there have been discussions between the Indian and Mauritian authorities with regard to re-negotiation of the Treaty. Adverse tax consequences would result if the Mauritian subsidiary ceased to qualify for the benefits under the India/Mauritius Double Tax Treaty (for example, if it were held that the Mauritian subsidiary was not a resident of Mauritius). There can be no assurance that the Mauritian subsidiary will continue to qualify for or receive the benefits of the India/Mauritius Double Tax Treaty or that the terms of the India/Mauritius Double tax Treaty will not be changed. Such an event may require the Mauritian subsidiary to pay or provide for tax liabilities that would reduce the net asset value of the Ordinary shares.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objective, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Yearly Financial Reports' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2013, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)     the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Hugh Bolland

Chairman                                                                                                                                                 

23rd May 2014

Group Income Statement

for the six months ended 31st March 2014

	(Unaudited)				(Unaudited)			(Audited)
	Six months ended				Six months ended			Year ended
	31st March 2014				31st March 2013			30th September 2013
	Revenue	Capital	Total	Revenue		Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Investment income	1,153	-	1,153	1,241		-	1,241	5,885	-	5,885
Other income	-	-	-	3		-	3	1	-	1
Gains/(losses) on investments held at
fair value through profit or loss	-	72,118	72,118	-		16,538	16,538	-	(66,546)	(66,546)
Foreign exchange gains/(losses)	-	31	31	-		(72)	(72)	-	(127)	(127)
Total income/(loss)	1,153	72,149	73,302	1,244		16,466	17,710	5,886	(66,673)	(60,787)
Management fee	(2,023)	-	(2,023)	(2,890)		-	(2,890)	(5,614)	-	(5,614)
Other administrative expenses	(658)	-	(658)	(668)		-	(668)	(1,345)	-	(1,345)
(Loss)/profit before finance
costs and taxation	(1,528)	72,149	70,621	(2,314)		16,466	14,152	(1,073)	(66,673)	(67,746)
Finance costs	(61)	-	(61)	(85)		-	(85)	(224)	-	(224)
(Loss)/profit before taxation	(1,589)	72,149	70,560	(2,399)		16,466	14,067	(1,297)	(66,673)	(67,970)
Taxation	-	-	-	-		-	-	-	-	-
Net (loss)/profit	(1,589)	72,149	70,560	(2,399)		16,466	14,067	(1,297)	(66,673)	(67,970)
(Loss)/earnings per Ordinary
share (note 4)
- undiluted	(1.51)p	68.54p	67.03p	(2.20)p		15.08p	12.88p	(1.21)p	(62.18)p	(63.39)p
- diluted	(1.51)p	68.54p	67.03p	(2.17)p		14.89p	12.72p	(1.21)p	(62.18)p	(63.39)p

The Group does not have any income or expense that is not included in net (loss)/profit for the period. Accordingly the 'Net (loss)/profit for the period' is also the 'Total comprehensive income for the period', as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.

The 'Total' column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital' columns are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

All of the (loss)/profit and total comprehensive income is attributable to the equity shareholders of JPMorgan Indian Investment Trust plc, the Company. There are no minority interests.

Group Statement of Changes in Equity

	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2014	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2013	30,124	83,019	41,929	5,886	231,854	6,362	(16,533)	382,641
Exercise of Subscription shares
into Ordinary shares	(54)	54	-	-	-	-	-	-
Issue of Ordinary shares on conversion
of Subscription shares	1,338	14,241	-	-	-	-	-	15,579
Cancellation of Subscription shares	(4)	4	-	-	-	-	-	-
Repurchase of shares into Treasury	-	-	-	-	(13,110)	-	-	(13,110)
Net profit/(loss) for the period	-	-	-	-	72,149	-	(1,589)	70,560
At 31st March 2014	31,404	97,318	41,929	5,886	290,893	6,362	(18,122)	455,670
	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2013	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2012	30,032	82,000	41,929	5,886	337,232	6,362	(15,236)	488,205
Exercise of Subscription shares
into Ordinary shares	(1)	1	-	-	-	-	-	-
Issue of Ordinary shares on conversion
of Subscription shares	20	218	-	-	-	-	-	238
Repurchase of shares into Treasury	-	-	-	-	(33,891)	-	-	(33,891)
Net profit/(loss) for the period	-	-	-	-	16,466	-	(2,399)	14,067
At 31st March 2013	30,051	82,219	41,929	5,886	319,807	6,362	(17,635)	468,619
	Called up			Exercised		Capital
Year ended	share	Share	Other	warrant	Capital	redemption	Revenue
30th September 2013	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2012	30,032	82,000	41,929	5,886	337,232	6,362	(15,236)	488,205
Exercise of Subscription shares into
Ordinary shares	(4)	4	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription shares	96	1,015	-	-	-	-	-	1,111
Repurchase of shares into Treasury	-	-	-	-	(38,705)	-	-	(38,705)
Loss for the year	-	-	-	-	(66,673)	-	(1,297)	(67,970)
At 30th September 2013	30,124	83,019	41,929	5,886	231,854	6,362	(16,533)	382,641

Group Balance Sheet

at 31st March 2014

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2014	31st March 2013	30th September 2013
	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	471,973	467,343	372,521
Investments in liquidity fund held at fair value through
profit or loss	-	-	7,000
Total investments	471,973	467,343	379,521
Current assets
Financial assets: Derivative financial instruments	-	57	-
Other receivables	1,711	523	99
Cash and cash equivalents	175	16,912	3,752
	1,886	17,492	3,851
Current liabilities
Other payables	(17,637)	(16,213)	(731)
Bank overdraft	(549)	(3)	-
Financial liability: Derivative financial instruments	(3)	-	-
Net current (liabilities)/assets	(16,303)	1,276	3,120
Net assets	455,670	468,619	382,641
Equity attributable to equity holders
Called up share capital	31,404	30,051	30,124
Share premium	97,318	82,219	83,019
Other reserve	41,929	41,929	41,929
Exercised warrant reserve	5,886	5,886	5,886
Capital reserves	290,893	319,807	231,854
Capital redemption reserve	6,362	6,362	6,362
Revenue reserve	(18,122)	(17,635)	(16,533)
Total equity shareholders' funds	455,670	468,619	382,641
Net asset value per Ordinary share (note 5)
- undiluted	429.3p	443.1p	365.5p
- diluted	429.3p	434.9p	361.6p

Company registration number: 2915926

Group Cash Flow Statement

for the six months ended 31st March 2014

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2014	31st March 2013	30th September 2013
	£'000	£'000	£'000
Operating activities
Profit/(loss) before taxation	70,560	14,067	(67,970)
Add back interest	61	85	224
Add back (gains)/losses on investments held at fair
value through profit or loss	(72,118)	(16,538)	66,546
Foreign exchange losses	-	(59)	-
Unrealised foreign exchange gains/(losses)	3	-	(3)
Net (purchases)/sales of investments held at fair value
through profit or loss	(20,335)	36,570	41,310
(Increase)/decrease in other receivables	(277)	(405)	19
(Increase)/decrease in amounts due from brokers	(1,336)	2,259	2,259
Increase in other payables	(106)	(501)	(366)
Increase/(decrease) in amounts due to brokers	2,186	(2,209)	(2,240)
Net cash (outflow)/inflow from operating activities
before interest payable and taxation	(21,362)	33,269	39,779
Interest paid	(61)	(85)	(224)
Net cash (outflow)/inflow from operating activities	(21,423)	33,184	39,555
Financing activities
Net proceeds from the issue of shares	15,580	238	1,111
Repurchase of shares	(13,183)	(35,903)	(40,304)
Increase/(decrease) in bank overdraft	549	(11)	(14)
Drawdown of short term loans	14,900	22,500	25,500
Net repayment of short term loans	-	(6,500)	(25,500)
Net cash inflow/(outflow) from financing activities	17,846	(19,676)	(39,207)
(Decrease)/increase in cash and cash equivalents	(3,577)	13,508	348
Cash and cash equivalents at the start of the period	3,752	3,404	3,404
Cash and cash equivalents at the end of the period	175	16,912	3,752

Notes to the Group Accounts

for the six months ended 31st March 2014

1.    Principal activity

      The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

2.   Financial statements

      The financial information for the six months ended 31st March 2014 and 2013 has not been audited or reviewed by the Company's auditors.

      The financial information contained in these half year accounts does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

      The information for the year ended 30th September 2013 has been extracted from the latest published audited financial statements. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

3.   Accounting policies

      The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board to the extent that they have been adopted by the European Union.

      Where presentational guidance set out in the Statement of Recommended Practice (the 'SORP') for investment trusts issued by the Association of Investment Companies in January 2009 is consistent with the requirements of IFRS, the financial statements have been prepared on a basis compliant with the recommendations of the SORP.

      The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 30th September 2013.

4.   (Loss)/earnings per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2014	31st March 2013	30th September 2013
	£'000	£'000	£'000
(Loss)/earnings per Ordinary share is based on the following:
Revenue loss	(1,589)	(2,399)	(1,297)
Capital return/(loss)	72,149	16,466	(66,673)
Total return/(loss)	70,560	14,067	(67,970)
Weighted average number of Ordinary shares in issue during
the period used for the purpose of undiluted calculation	105,268,164	109,209,640	107,223,518
Weighted average number of Ordinary shares in issue during
the period used for the purpose of diluted calculation	105,268,164	110,615,487	107,223,518
Undiluted
Revenue loss per share	(1.51)p	(2.20)p	(1.21)p
Capital return/(loss) per share	68.54p	15.08p	(62.18)p
Total return/(loss) per share	67.03p	12.88p	(63.39)p
Diluted1
Revenue loss per share	(1.51)p	(2.17)p	(1.21)p
Capital return/(loss) per share	68.54p	14.89p	(62.18)p
Total return/(loss) per share	67.03p	12.72p	(63.39)p

      ¹The Subscription shares rights lapsed on 2nd January 2014.

5.   Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2014	31st March 2013	30th September 2013
Undiluted
Ordinary shareholders funds (£'000)	455,670	468,619	382,641
Number of Ordinary shares in issue excluding shares held
in Treasury	106,142,798	105,764,303	104,683,965
Net asset value per Ordinary share (pence)	429.3	443.1	365.5
Diluted1
Ordinary shareholders funds assuming exercise of
Subscription shares (£'000)	n/a	486,223	399,373
Number of potential Ordinary shares in issue excluding
shares held in Treasury	106,142,798	111,813,755	110,433,755
Net asset value per Ordinary share (pence)	429.3	434.9	361.6

      ¹The Subscription shares rights lapsed on 2nd January 2014.

      The Company will only re-issue shares held in Treasury at a premium and therefore these shares have no dilutive potential.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the half year report will be submitted to the National Storage Mechanism and will be available shortly for inspection at www.morningstar.co.uk/uk/NSM

The half year report will also be available shortly on the Company's website at www.jpmindian.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

IR GMGZKFFKGDZM